EU quota on textiles from China backfires

By James Hall

12:01AM BST 11 Sep 2005

Indian manufacturers have enjoyed a boom in orders thanks to the European Union's decision to re-impose quotas on Chinese goods, which has backfired spectacularly.

Clothing manufacturers in India have seen orders from European and US retailers rise by up to 25 per cent since June as store groups have switched from Chinese producers in the wake of the "Bra Wars" fiasco.

Factory owners and lawyers in India are also reporting a huge surge in interest from Asian-based sourcing groups - brokers that act between retailers and manufacturers - which plan to transfer their entire operations to India to take advantage of the lack of import quotas on goods made there.

The Chinese quotas were re-imposed by the EU and the US in June - six months after they were lifted for the first time - in an attempt to limit the flood of cheap goods into Europe from China. The intention was to prop up domestic textile manufacturers. However, business has merely shifted to India.

Meanwhile, UK business leaders have slammed the EU's imposition of quotas on China as counterproductive.

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Sir Martin Sorrell, the chief executive of WPP, the advertising group, said the UK as president of the EU had "failed the globalisation challenge" during the Bra Wars dispute with China.

He said the imposition of quotas would make China less responsive to the EU's point of view at the World Trade Organisation summit in Hong Kong in December. "Western business has benefited for years from the opening up of markets like China. Just when we start to feel the heat we slap on protectionist barriers. That's not a good signal to send," he said.

Sir Digby Jones, the director general of the CBI, said: "How can we expect the Chinese to play by WTO rules when the EU changes those rules on a whim?"

A poll by The Sunday Telegraph of clothing manufacturers in Tirupur, India's textile hub, found that sales had risen by between 10 and 25 per cent over the past three months.

"Orders are pouring in. We are also receiving a lot of inquiries from companies across the world who are trying to shift their base to India," said Senthilkumar Kg, the marketing director of Chitra International, an Indian textile manufacturer.

Indian manufacturers have also complained that Chinese textile companies are trying to circumvent the restrictions by faking the certificates of origin of their products to suggest that they were made outside China. According to manufacturers, the volume of goods that claim to be "made in Vietnam" has rocketed in recent weeks.

A dispute over quotas between the EU and China was resolved last week - meaning that the 87m garments stuck in Europe's ports will be released from this week. But the US remains at loggerheads with the Chinese authorities over quotas.